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CRM Numbers Grow, But Also Mislead
The customer management applications market rose 8 percent in 2006, as it did in 2005; SAP and Oracle continue to lead, but their revenue figures don't tell the full tale.
Posted Jul 13, 2007
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The market for customer management applications grew a solid 8 percent last year, the same growth seen in 2005, despite consolidation activity, according to new findings released by AMR Research earlier this week. Revenue in 2006 rose to $12.6 billion, spurred significantly by continued interest the software-as-a-service (SaaS) and hosting sectors, and is expected to maintain its growth, reaching $19.2 billion in four years. "Consolidation typically does stunt the overall market's growth, but it's really that high-growth SaaS piece that is carrying the market right now," says Rob Bois, a research director at AMR Research and one of the three authors of "The Customer Management Market Sizing Report, 2006-2011." An improvement in CRM's reputation has helped, as well. "CRM doesn't have the same negative stigma attached to it that it did a few years back," Bois says. "A lot of organizations recognize that to continue driving growth within their companies they need to address the front office." According to AMR's findings, SAP retained the market's top spot, with $2.27 billion in revenue and year-over-year growth of 19 percent. Oracle Corp.'s combined customer management revenue, including that of its native brand and of acquired companies PeopleSoft and Siebel Systems, totaled $1.38 billion--a massive increase of 196 percent over its performance a year ago, when Siebel's numbers were included separately in AMR's rankings. It's important to note, however, that there are underlying factors behind the stats that are significantly shaping SAP's and Oracle's growth rates. While SAP continues to dominate CRM revenue evaluations, the company is often criticized for what some observers consider a comparatively low number of live deployments. For Oracle's part, its revenue now includes Siebel's--and combined, the companies fared less well than they had on their own. "If you look at the combined revenues of the two companies in 2005 versus 2006, it's down about 26 percent," Bois says. Additionally, Oracle's apparent inability to catch up to SAP's customer management application revenue may reflect the company's approach to reporting. The report notes that Oracle now tracks its analytics revenue as infrastructure rather than applications revenue; Siebel used to include analytics within applications. The Siebel acquisition also directly impacted Oracle's year-over-year growth. "They have to rebuild the pipeline, and people were a little confused as to how Siebel fit into the portfolio," Bois says. "As those concerns go away and as the pipeline comes back, Oracle will turn around and it'll probably experience good growth."
Meanwhile, there's a better indication of the evolving competitive landscape: Last year's sixth seed, Salesforce.com, although still significantly trailing its larger brethren, is steadily inching higher. The on-demand vendor cracked into the top three for the first time, growing 60 percent to $497 million. Contact center specialist Aspect, which acquired Concerto Software in July 2005, also improved its standing, moving up from eighth to fourth, with $488 million in revenue. (Concerto's 2005 revenue was $189 million.) Rounding out the top 10 are vertical players Amdocs ($458 million) and Dendrite International ($331 million), Avaya ($262 million), Microsoft ($259 million), SAS Institute ($241 million), and Witness Systems ($222 million). (In February 2007, Witness was acquired by Verint.) The top 10, according to their shares of the overall revenue market, reveal that most of the top performers each have just a 2-percent-to-4-percent slice of the pie:
    Company..............2006...........2005
  • SAP..........................18%.................16%
  • Oracle......................11%...................4%
  • Salesforce.com...........4%...................3%
  • Aspect.......................4%...................2%
  • Amdocs......................4%...................4%
  • Dendrite Int'l...............3%...................3%
  • Avaya.........................2%...................2%
  • Microsoft.....................2%...................2%
  • SAS Institute................2%...................1%
  • Witness Systems..........2%...................2%
When ranked based on license revenue, however, vendor positioning alters significantly. While SAP ($741 million) and Oracle ($530 million) continue to lead the way, Salesforce.com falls off the list completely. The rest of the license-revenue top 10:
  • Avaya...................................................$216 million
  • SAS........................................................$198 million
  • Microsoft................................................$157 million
  • Amdocs..................................................$137 million
  • Aspect....................................................$112 million
  • Cisco Systems--ICSG...................................$93 million
  • Genesys Telecommunications Laboratories...$86 million
  • NICE Systems.............................................$83 million
AMR does have a separate category for what it calls "customer management vendor alternate pricing"--an AMR phrase that includes revenue derived from hosted (or "software-as-a-service") delivery. Salesforce.com is the clear leader in that market, with 42 percent of the overall revenue. The other leaders in that field are Digital River (19 percent), Oracle (8 percent), and RightNow Technologies (6 percent), with "Others" rounding out the remaining 25 percent of the market. Bois notes that, despite the market's growth, hindrances are still a factor: relatively high failure rates for CRM deployments and the inability to build proper ROI metrics. "A lot of CRM vendors are aggressively investing in usability, which is going to help some of those risk factors," he says. "CRM is going to become more pervasive throughout the company, but that won't be able to happen until it becomes more palatable and easy to use by the casual user." Related articles: Oracle's Smaller Slice of CRM's Bigger Pie The worldwide CRM market grew 11.5 percent in 2006 to just under $6.5 billion in revenue; Oracle Corp. sees both its revenue and its market share slip. CRM Is Back on the Glory Road AMR's 2005 report reveals second consecutive year of growth as market enters its "second wave." CRM Sticks to the Growth Track New license revenue continues to rise in the industry, with marketing applications predicted to be the top performers through 2009, despite mergers and economic pressure.
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